Recent data from HMRC has highlighted a fascinating shift in UK retirement planning: there has been a significant surge in the number of children’s pensions being opened across the country. In fact, the latest figures show that contributions into Junior SIPPs have risen by almost 40% over recent tracking periods, with thousands of parents and grandparents taking action. 

 

While opening a pension for a child isn't something I see on a weekly basis, it is becoming a much more frequent conversation in my practice. Interestingly, in my experience, it is rarely the parents funding these accounts—it is almost always grandparents looking to support their grandchildren. 

So, why the sudden spike in interest? 

 

The boost in numbers is clearly linked to the sweeping changes to Inheritance Tax (IHT) coming into effect from April 2027, which will see unused pension funds dragged into the IHT net. Grandparents are actively looking for legitimate, tax-efficient ways to pass wealth down generations now, rather than leaving a hefty liability for the future. 

 

If you are a grandparent considering this, here is a balanced look at how the options stack up: 

You can invest up to £2,880 per tax year into a Junior SIPP. Because of government tax relief, the state automatically tops this up by 20%, turning your investment into a £3,600 total annual contribution. 

• The Pros: It is an incredible IHT planning tool. If regular contributions are made as normal expenditure out of income, it is outside of your estate immediately. Furthermore, the compounding effect of growth over 50+ years is astronomically powerful. 

• The Cons: The money is completely locked away. Under current rules, your grandchild won't be able to access this money until they reach age 57 (or potentially older by the time they grow up). As a grandparent, you are highly unlikely to ever see them enjoy the benefits of this wealth. 

£3,600 per annum to age 18 at 5% annual growth, produces a fund of c£100,000 at age 18. This amount left invested until age 57, could have a total fund of between £500,000-£700,000. 

If locking money away until your grandchild is approaching their sixties feels too restrictive, a Junior ISA is the natural alternative. The current allowance for a JISA is £9,000 per tax year. 

• The Pros: Like the SIPP, it grows tax-free and allows grandparents to gift money out of their estate. 

• The Cons/Risks: The control element changes dramatically. At age 18, the entire pot legally transfers directly to the grandchild. For some grandparents, handing over a substantial five-figure sum to an 18-year-old can feel incredibly daunting—you have no control over whether they spend it on a university degree, a house deposit, or a gap year party. 

 

Striking the Right Balance 

Passing wealth down the generations is no longer just about writing a Will; it is about proactive, long-term asset distribution. Children’s pensions and JISAs are spectacular tools, but they must fit into a wider, holistic family financial strategy. 

Are you looking at your estate planning ahead of the 2027 IHT changes? Let’s connect. Drop me an email, and let’s discuss the most effective way to protect your legacy and support the next generation.